tv Nightly Business Report PBS April 3, 2012 7:00pm-7:30pm EDT
>> susie: the federal reserve won't be providing help to the economy right away, but it is worried that recent job gains are only temporary. >> we think, down the road, the fed will be easing again. it's just a matter of when. >> tom: uncertainty about job growth isn't holding back auto sales. march sales roar ahead. we talk with ford motor to find out why. it's "nightly business report" for tuesday, april 3. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
captioning sponsored by wpbt >> tom: good evening. it looks like the federal reserve is feeling less and less like pumping more money into the u.s. economy right now. minutes from the federal reserve's march policy meeting were released today, and susie, they show, while the economy has been getting stronger, the central bank is still worried about the jobless rate. >> susie: still, tom, even with that caution, only a couple of members thought additional bond buying by the fed might be needed if job gains slow. the fed's key worries-- americans aren't receiving meaningful pay increases. gas prices are high. and europe's debt crisis could weigh on the u.s. economy. stocks tumbled, as investors interpreted those minutes to mean no qe-3.
the dow fell 65 points, the nasdaq and s&p both lost about six. >> tom: even though recent economic indicators like manufacturing and jobs have been improving, economist dana saporta with credit suisse thinks it's just a matter of time before the fed provides more stimulus to the economy. >> our debt is growing by about $5 billion every business day, and the interest to pay our debt service obligations has to stay low; otherwise, it could explode. right now, about 2.3% percent is the rate we pay on our debt. if that goes up by a large amount, the damage could be very dangerous. >> tom: while the federal reserve may be cautious about the pace of the economic recovery, the recession is in the auto industry's rear view mirror. march was the best month for u.s. sales since 2007 for many auto companies. sales at chrysler were up a 34%, thanks to the popularity of
small fiat cars. g.m. sales increased 12%, ford's were up 5%. on the import side, volkswagen saw its sales surpass those of chrysler. japan's toyota and nissan both celebrated double-digit sales gains last month. and south korea's hyundai notched up a sales increase just under 13%. as diane eastabrook reports, a strengthening u.s. economy and rising pump prices were the fuel behind those strong numbers. >> reporter: for g.m., sales of small cars like the chevy cruze and sonic packed a big punch in march. the auto maker said sales in the small and compact segment were up more than 60%. still, consumers weren't ignoring larger vehicles. last month, they snatched up nearly 40% more mid-sized cars like the malibu than they did at the same time last year. what was going on? g.m.'s vice president of u.s. sales credits $4-plus gasoline, coupled with a new line of fuel- sipping models. don johnson says, today, almost half of g.m.'s fleet get an
average fuel economy of 30 miles per gallon. just a few years ago, only about 15% of its products were that fuel efficient. >> when you look at the fuel economy aspect of it, clearly, consumers are looking to replace some of their older vehicles with more fuel efficient vehicles. and for us, that paid off very well because we have the best fuel efficient portfolio that we've ever had. >> reporter: still, high fuel prices are a double-edged sword. they cut into consumers disposable incomes, prompting many to pull in their purse strings. but jeffrey schuster, senior vice president of forecasting for lmc automotive, says high fuel prices can sometimes spur auto sales. >> certainly, there's a tipping point where consumers start to look at different vehicle types- - in other words, smaller vehicles. we saw that back in 2008 when we got over $4 a gallon. now that we're there again, there's no question we're starting to see consumers switch into smaller vehicles. >> reporter: the trick now for auto companies is riding the march momentum into the summer, when sales typically slow.
g.m.'s johnson thinks the improving economy could help. >> we're adding more jobs, consumer confidence is building, and that is helping drive the industry, as it has over the past year, as well. >> reporter: fatigue could also help. right now, the average u.s. vehicle is 11 years old. diane eastabrook, "nightly business report," chicago. >> susie: ford is also saying higher gas prices are actually helping car sales. that's what mark fields told me today. he's the head of ford's u.s. sales. >> a lot of folks out there have older vehicles, there's a lot of pent up demand because during the economic downturn they held off on buying. so when they're seeing these new vehicles with great fuel economy, like we have at ford, a third of our vehicles will have one model that gets at least 40 miles per gallon, they're saying maybe it is time to trade in their vehicle. >> susie: what about the so-called choking point, is there a price level where gas gets too high where it chokes
off sales? >> who knows, it could be $5 a gallon. $5 a gallon, the consumer may say maybe i really do have to start cutting back on miles driven and whether or not i buy a new car. right now at the $4, 4.50 a gallon, a lot of what's driving the market today about the increased fuel economy, it's about i think we won't see the industry go down a lot. i think if it goes over that we'll start seeing some impact. but what we are seeing impacts in the type of vehicles that are being sold. small vehicles and small utilitys are growing as a total percentage of the industry. larger vehicles coming down. >> susie: when do you think consumes will really go for the hybrids and the electrics? >> internal combustion engines have been around a look time and some consumers are very comfortable with that technology. other consumers at the same time are willing to pay a bit more premium to be the first on the block to have the latest technology and have that higher fuel economy.
so i think it's a number of factors that are rolling around in there, and it's overlaid by what is the price of gas at that point in time. >> susie: we saw last night the unveiling of the new snazzy lincoln, the mkz. but you know, when you think luxury, most people think mercedes or bmw, not lincoln. what are you going to do to change that? >> first and foremost it's about compelling product. so when you see this vehicle on the road, or you see it in our advertising et cetera, and hopefully when you look at the elegant design and the craftsmanship that is in it, you'll see that's a vehicle that i'd like to check out. we're offering features on here that's new to the industry. we're offering a fully retrac retractable panoramic glass roof on here, which is basically a 15 square foot opening, it's like driving a convertible. and it gives a whole new die nam take a look the vehicle, not offered on other vehicles. >> susie: as you know, consumers have so many choices when it comes to buying a car. what are you doing to convince
people to buy a ford? how do you keep those customers? >> first off you continue to give them very compelling product. and in our case our strategy is very simple. give them the best quality, the best fuel efficiency, safety, and technology all wrapped around a great design and great value. that first and foremost is our most important thing. >> susie: tomorrow, we'll be reporting from the new york auto show. we'll talk with general motors' mark reuss, president of north america, for his take on the outlook for auto sales and consumer attitudes when it comes to buying a car. groupon shares ended the day down a quarter, stabilizing after yesterday's sharp drop. "the wall street journal" says the securities and exchange
commission is now looking into groupon's accounting. the news comes just a few days before the nation's accounting rules get trimmed back. the rewrite is part of what's called the "jobs act." darren gersh takes a look at what that means for investors. >> reporter: this can't be the kind of two-for-one offer groupon had in mind. first, the company says it is rewriting its most recent earnings report. then, it becomes a kind of short-hand for what critics say is wrong with the jobs act. >> companies are going public, they understand there is a lot of scrutiny, but yet we still have problems with accounting and auditing, and the reliability of financial information. >> reporter: and critics say the kinds of problems we've seen at groupon will get worse this week when the president signs the jobs act into law. the new law will relax accounting and financial disclosure requirements on companies with less than a billion dollars in revenue that decide to go public. investors will lose the ability to vote on executive pay. internal controls will be relaxed. and the law relaxes conflict of interest rules that now ban research analysts from attending
pitch meetings set up by investment bankers trying to sell company management on an i.p.o. investor advocates say it's the wrong way to go. >> it decreases the amount of reliable, verifiable information that investors get, and that decreases investor trust in the market. >> reporter: supporters of the jobs act say it is not the end of the world, but it's not a cure-all, either. >> it's not going to turn the economy around. we are going to see some jobs added, yes, but it's not going to lead to mass fraud anymore than would have happened otherwise in our securities markets. >> reporter: but groupon's real challenge is not regulation. the accounting restatement was pinned on customers asking for refunds, and that could be a sign groupon is having a hard time satisfying people as it develops more expensive coupons. >> so, groupon's in a situation where it's breaking into new categories of more complex offers, and as they try to march up the food chain in terms of total ticket price, they're having trouble making that business model transition.
>> reporter: today, groupon got some more bad news. the company was slapped with a lawsuit claiming it misled investors about its finances. darren gersh, "nightly business report," washington. >> tom: apple has been a hot stock for years. it's up seven-fold just since 2009. it's almost universally loved on wall street, and even with all that optimism, one analyst thinks it could have a four- digit stock price soon. >> price target is $1,000 in two years. >> tom: that's gene munster of piper jaffray. he's been following apple for many years, and even he was surprised when his analysis led him to predict apple would hit $1,000 per share in 2014. but he also said it's not hard to come up with that forecast, given apple's earnings power. >> even though it seems like a big number, the reality is their earnings power is more than enough, sufficient to them to that $1,000. >> tom: if he's right and apple trades for a $1,000, it would make apple the first publicly traded company with a market value of $1 trillion.
apple would be worth as much as the economies of venezuela, hong kong, and switzerland combined. for munster, his prediction hinges on apple's ability to continue to innovate products people want. and he's confident that culture lives on, even after the death of apple co-founder steve jobs. >> first, they have the framework already in place. they have the university essentially within apple that teaches this relentless pursuit of detail within their products, so i think some of steve jobs... some of his teachings will continue to carry on. >> tom: in 2004, when munster started analyzing apple, it was making the ipod. he said the wild card was what he called the "apple option," "potentially allowing the company to falter numerous times without investors becoming disgruntled." with shares trading at all-time highs-- over $600 today-- those shareholders have been richly rewarded as apple has conquered first mp3 players, then smart phones, and now tablet computers. >> there is seemingly huge
investor exuberance over this story. everyone seems to be positive, which should be a red flag that everyone's positive, but the reality is, if you look at apple's valuation, it suggests the opposite. >> tom: so who are the buyers of apple hoping to raise its stock price? munster points out some new investors will be those looking for income with apple beginning to pay a dividend to shareholders this summer. >> susie: still ahead, in tonight's "beyond the scoreboard," we talk with under armour c.e.o. kevin plank about taking on nike. tonight, we continue our special coverage of the spring housing market. manhattan real estate got leveled during the great recession, just like other parts of the nation. but manhattan is back. fresh data shows the average price for a co-op or condo in the first quarter was $1.34 million. that's a gain of nearly 1% from a year ago. suzanne pratt takes a look at what's selling in the big apple.
>> reporter: spring came early to new york city this year, and so did the prime selling season for real estate. warm temperatures got people looking earlier than usual, and broker ann lenane says homebuyers are more confident about the economy. >> it is hot. the crazy thing about it is just that there's no inventory. so, as brokers in january, we usually have a ton of inventory that will come in and start progressively getting more and more. but january came, february came, and there was just nothing. there's been a pent-up demand. >> reporter: here's the curious thing-- manhattan's market is becoming bifurcated. sales of studio apartments picked up in the first quarter, and luxury is very strong. in new york, "luxury" means homes that go for $5 million, or a lot more. take, for instance, this stunning townhouse, a lenane listing. it can be yours for a cool 12 million bucks. it's got tranquil living space,
a killer master bathroom, and quite the gourmet kitchen. >> this is caesar stone. we've got italian custom cabinets, two dishwashers, very high-end appliances. >> reporter: so, who's buying these high-priced digs? experts say, in large part, foreigners. and guess what. many are paying cash. the most extreme example of international wealth-- a penthouse at 15 central park west. a russian billionaire recently bought it for a $88 million. by the way, it's for his 22-year-old daughter. it's hard to imagine a deal with such a celestial price tag only a few years post-financial crisis. but housing expert jonathan miller says the more terrestrial end of the market has yet to recover. >> the balance of the market, i almost describe as "dull or mundane," this stable or moving sideways type market, because the credit picture hasn't changed. >> reporter: that didn't stop developer marc ravner from
breaking ground on one of new york's few new condominiums. the nine-story building in west soho will be finished this summer. not only is the view breathtaking, but the price, an eye-popping four million bucks. and get this-- each apartment has its own floor. >> these apartments are going to be three bedroom, three and a half bath. 2,488 square feet on the typical floor. >> reporter: that's a family sized apartment. >> it's a family sized apartment, and it was designed with a family in mind, so that you have a kitchen that you can cook for a family of four, or host a thanksgiving dinner for 15. >> reporter: even though more and more families choose to stay in the big apple these days, miller predicts the market could take a few years to mend. >> we do have weakness out of wall street, which is a key economic driver here in the city, especially as it relates to housing. compensation is off of last year. it's not clear whether this year will ultimately be better or
worse than last year. >> reporter: manhattan prices are still well below where they were before the 2007 peak. but the market here is rebuilding, and it's one of the strongest in the country. suzanne pratt, "nightly business report," new york. >> susie: tomorrow, we head to vegas as we continue our series on local housing markets. we find out just who's betting on a housing recovery. >> tom: after the federal reserve gave no indication it was ready to pump more money into the economy, u.s. stocks lost a bit of their steam. the s&p 500 had a slightly weaker tone from the opening
bell today after hitting a post- recession high yesterday. the index hit its lowest level of the session less than an hour after the central bank released minutes from its latest interest rate setting meeting, minutes that do not provide encouraging signs the fed thinks the economy needs further help right now. with the federal reserve on hold, energy prices cooled, pushing down the energy sector 1%. the materials and financial sectors also weighed on the broad market. the biggest dow industrial loser was bank of america, falling 2% on lighter than usual volume. after shooting up 70% this year, the stock has been unable to break above $10 per share. also pressuring the financial sector was investment bank morgan stanley, falling more than 2%. the firm's former mortgage servicing business is the target of a federal reserve review looking at thousands of foreclosures. the bank could face financial penalties for allegedly improper foreclosures. we also saw selling pressure of u.s. government bonds with the fed on hold. that pushed up market interest rates. the benchmark ten-year note yield for u.s. government debt rose to almost 2.3%, its highest interest rate and lowest price in a week.
march saw the biggest bond market sell-off in months. we also saw gold prices fall almost 2%, dropping to the bottom of the trading range they've been in since the middle of march. goldcorp slid 5.5%, newmont fell more than 3%, barrick dropped almost 3%. one buyout, and speculation about a possible buyout today. u.s. airways has been rumored to be interested in going after the bankrupt american airlines parent amr. shares of u.s. airways rallied 2%, perhaps helped out in part to the drop in energy prices. "the wall street journal" reports u.s. airways sees more than $1.5 billion in yearly savings if the two airlines merged. molson coors stock fizzled 5.5% after announcing a deal to buy star-bev for $3.5 billion. star-bev runs breweries in central and eastern europe, and continues the trend of global consolidation in the beer business. and that's tonight's "market focus."
>> susie: as we mentioned earlier, march was a strong month for car sales, but surprisingly, there's one group that's just not that into driving-- teens. tonight's commentator looks at how the times have changed. he's todd buchholz, author of "rush: why you need and love the rat race." >> are young people stuck in second gear? getting a driver's license is not a priority anymore. remember the movie "back to the future"? in the early '80s, when marty mcfly was desperate to trade his skateboard for a delorean, 80% of 18-year-olds strutted out of the dmv with newly-minted licenses. by 2008, that number dropped to 65%. you might want to blame the high
cost of cars or gasoline, but it actually takes fewer weeks of work to buy a car today than in the early '80s, and gasoline prices didn't get out of line until a few years ago. kids may be too happy sitting in their parents' home, checking facebook. one teenager told me, "driving just gets in the way of texting, anyway." so what's the problem? we'll have safer roads, right? probably, but we might have a less vibrant economy. young people are not just delaying driver's licenses, they are less likely to want a summer job, and when they graduate, they are also less likely to move in order to take a real job. they're becoming homebodies. that's nice, but will they ever earn enough money to buy their own home? i'm todd buchholz. >> tom: when your competitors are household names used by superstar athletes, it can be tough to make a name for yourself, but athletic gear maker under armour has been able to do just that. in tonight's "beyond the scoreboard," rick horrow speaks with under armour c.e.o. kevin plank.
>> under armor is at this moment in time, we spent our first five years growing from zero to 5 million, the second five from 5 to nearly 300 million and next five years from 300 crossing a billion dollars. so as great as that was for 2010, we grew 38% last year. so we are pushing and our latest outlook has us growing another 20, 25% in line with our long-term growth targets. >> reporter: at your inception, what were the points of departure between you and reebok and anything yankee? >> if you told me i was going to be competing with these juggernaut brand i probably would have said gosh, i'd never be able to compete with them. but we went out and started making the world's greatest t-shirt for football players to wear under their pads, then baseball playeres won and it lacrosse players and one chapter at a time, it was taking it and making sure it was very real, very manageable. that's way we are today. we need to be careful of not outgrowing ourselves and
thinking, getting beer muscles at a billion dollars isn't the way to respond. we have a chance to do something great, but we need to do it very thoughtfully, carefully and deliberately. >> reporter: the whole proliferation of social media, you're a lifestyle brand now, not just a retail brand and a lot of it is the trajectory of social media to tell the full story. how important is that now and how important is it in the future? >> i think it gives you a lot more access to doing things differently and gives it levels of playing the field in a big way. it gives voices to those that may not otherwise have them and also helps us live beyond how much can we spend this the 30 seconds or 60 second commercial. >> what's the next great partnership that we don't know about yet? >> i always had great respect for ralph lauren, here's a guy who went from sell nick ties in the 70s to now you walk into a home depot and you see this paint there that's called ralph lauren paint and your reaction is my god what happened to ralph lauren, paint in home depot, this must be the greatest paint in the
whole world. i used to challenge my team and i'd say 25 years from now, another 16 years, 25 years from now i want to walk into home depot and see paint that's called under armor and i want to know all the chapters we go through. there were a lot of other things that came along the way. we have evolved from being this apparel company into being a technology company, because i do think that's the expectation that the consumer has. they're not thinking about what is this shirt covering or i like the color, but how is this piece of equipment actually helping me. there's a much bigger, broader idea out there for under armor and you wonder who is thinking about this type of innovation in aparcel and footwear, and we believe that's the place that makes us makers of all things sport. >> susie: coming up on the program tomorrow: the c.e.o. of organic food-maker annie's. john foraker talks with us about his company's big i.p.o. last week, the health food business, and commodity prices.
smiles at that auto show, and certainly the march sales we reported on tonight. that's "nightly business report" for tuesday, april 3. i'm tom hudson. good night, everyone, and good night to you, too, susie. >> susie: good night, tom. i'm susie gharib. good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org